Menzies ‘could take a year’ to decide on split

John Menzies chairman Dermot Smurfit

The new chairman of Edinburgh-based aviation logistics and news distribution firm John Menzies said it could take up to a year to decide if Menzies should split into two companies, partly due to complications with the groups’ pension schemes.

The news came as Menzies reported revenue rose slightly to just over £1 billion in the six months to June 30 and profit before tax fell to £3 million from £5.8 million in the same period last year.

Menzies has been under pressure from activist shareholders to split into two separate companies in aviation and distribution.

Chairman Dermot Smurfit said one of his tasks was to review the structure of the group in order to maximise shareholder value.

“This will include looking at whether our two operating businesses are best placed to prosper while they are part of one group,” said Smurfit.

“The situation is complex, particularly with regard to our pension schemes.

“Management have already engaged with specialist advisers and our pension trustees, and work is underway to structure the pension scheme in such a way as to give the board the maximum amount of flexibility in future.

“I expect this work to take up to 12 months and we will update shareholders when appropriate.”

Smurfit said underlying financial performance in the first half was ahead of 2015, reflecting the positive impact of aviation ground handling gains, the start-up of Menzies’ acquisition in Bermuda and a return to stable operations at London Gatwick. 

He said Menzies Distribution performed to expectations, with print media declines largely mitigated by strong sticker sales associated with the European football championships and Menzies’ expanding e-commerce business. 

“The group continues to make positive progress and the board expects the full year outturn to be in line with our expectations even before allowing for the positive impact of foreign exchange rates,” said Smurfit.

“Nevertheless, as shareholders will be aware the group has underperformed in the past and the board is determined to address historic performance shortfalls including a review of the group structure.”

Smurfit said it was too early to know the implications of the UK’s decision to leave the European Union, “but it is probable that the UK economy will face a period of uncertainty.”

“We will continue to monitor the situation closely, however, with around 80% of our aviation revenues generated outside of the UK, we would expect our sales and financial performance to benefit should sterling remain at current levels or depreciate further.”